UPDATE 1-Royal Bank of Canada shuts European government bond business

LONDON, July 24 (IFR) - Royal Bank of Canada shut down its European government bond trading business on Wednesday, reversing an expansion into the sector which started three years ago.

“We review our businesses regularly and make changes to optimize them as needed. This tactical adjustment in our product offering is consistent with our strategy of being active in the markets in which we add the most value to our clients,” the bank said in a prepared statement.

RBC started building up a portfolio of European primary dealerships in 2010, but this morning the five traders on the desk were informed the bank was pulling back from the market, according to several sources.

“The European business is a central part of our platform and of our strategy globally. We see this as an opportunity to refocus our efforts and invest in areas of core strength within the region,” RBC said.

RBC’s expansion three years ago also included a major push into the debt capital markets, especially in the high volume sovereign, supranational and agency sector. Being a primary dealer and thus active in trading government bonds is widely seen as being essential to winning syndicated sovereign bond mandates.

A spokesperson for RBC was keen to stress it remained committed to Europe and is still a primary dealer in Canada, the US, the UK, and the equivalent of a primary dealer in Australia.

There is no suggestion that it is pulling out of DCM or the SSA business, where it has hired several veterans.